Political Activity

By Laura Kalick

Section 501(c)(3) organizations may not participate in, or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office. The IRS reviewed the political activity of 501(c)(3) organizations during the 2004 election year and has found that there has been widespread noncompliance with the rules. IRS receives referrals from the public and also investigates organizations after looking at state political contribution records. As a result of the referrals, IRS conducted limited scope examinations of the organizations in question and in 4% of the cases actually revoked exempt status and has proposed revocations in 22% of the cases. Religious organizations are included in the prohibition against political activity and there have been many violations by such organizations noted in the 2004 IRS study. Use of the pulpit to support particular candidates is clearly considered to be political activity.

With the next election cycle approaching, the IRS has just published Rev. Rul. 2007-41, 2007-25 I.R.B. to provide guidance on 21 factual patterns that may or may not involve prohibited political activity. The scenarios involve voter registration drives, voter education, public forums and business activities of the organization such as rental of mailing lists, leasing of office space or the acceptance of paid political advertising.

Laura Kalick is a senior manager in the Nonprofit Tax practice in BDO Seidman’s Greater Washington, D.C. office. She can be reached at lkalick@bdo.com. Mike Sorrells is the director of the Nonprofit Tax practice in BDO Seidman’s Greater Washington, D.C. office. He can be reached at rsorrells@bdo.com.

> Next Article - Phone Excise Tax Refund Applies to 2006 Exempt Organization Tax Returns